Banks Rank TRID Implementation, Cybersecurity as Top Concerns

Increased anxiety over the new “Know
Before You Owe” mortgage rules leads the list of major challenges cited by U.S.
banks and credit unions in this year’s Regulatory and Risk Management
Indicator survey conducted by Wolters Kluwer Financial Services. Concern over the new
rules, also known as the TILA-RESPA Integrated Disclosure (TRID) rules, jumped nine percent from last
year’s Indicator survey results, with 86 percent of respondents ranking
TRID as the top regulatory challenge facing their organization.

When
asked about escalated risk priorities for 2016, 66 percent of respondents cited
cybersecurity as their top concern. Increased cybersecurity anxiety, against a
backdrop of well-publicized security breaches the past year at a number of
prominent U.S. government, retail, and financial institutions, was followed by
regulatory change management (49 percent), third-party risk (30 percent), and
fair lending compliance (29 percent).

Conducted in August 2015, the
Indicator generated 539 responses among banks, credit unions and other
lenders. To calculate the Indicator scores, Wolters Kluwer Financial
Services used 10 main factors, seven of which revolve around direct input from
banks and credit unions on their top compliance and risk management concerns,
and three of which are based on regulatory data the company compiles. Survey
feedback, together with increasing regulatory fines, new regulations, and
enforcement actions issued by federal regulators, drove the increases in the
Indicator scores.

“The continuing upward trajectory of concern
shown by banks and credit unions closely correlates with the growing level of
angst we’ve witnessed while helping clients the past year across a range of
issues—including TRID preparation—with other major regulations such as the Home Mortgage Disclosure
Act proposed data collection rules looming on the horizon,” said Timothy R. Burniston, executive
vice president, Wolters Kluwer Financial Services. “Their concerns reinforce the
need for instituting thoughtful, proactive regulatory change and risk management
practices to help address these mounting challenges.”

When asked about
complying with the complex TRID rules, 32 percent of respondents cited
“collaborating with stakeholders,” while 24 percent identified “last-minute
changes that trigger closing delays” as the top anticipated challenges. Another
17 percent viewed “information technology preparedness” as top challenges in
complying with TRID, while 18 percent were unsure about the regulation’s
greatest impact.

Despite the continued increases in overall anxiety
levels, staffing investments to bolster regulatory compliance and risk
management efforts declined slightly, with 22 percent of respondents indicating
their organizations had moved staff during the past year from revenue-producing
roles to help address new regulatory requirements—a seven percent decline from
2014—and another 21 percent citing they had increased staffing levels to help
manage risk, a 13 percent decline from last year’s results.